Welcome to the May edition of Money While You Sleep. This past month was a head scratcher when it comes to the markets. I will get into that in a minute.
Here are a few highlights as we slowly get back to a normal society
- Z has been doing online video dance classes.
- Planted an additional 25 trees and shrubs.
- Built a privacy wall on our deck
- Prepped the area to install a shed underneath the upper deck.
- Continued to work from home for the most part.
This month the market continued its gains as we saw the TSX go from $14,780 to $15,192. We had one sell and one buy as you can see below
Chorus Aviation Inc. Ticker CHR.TO
One thing i’ve learned over the years is sometimes you got to cut your losses . If you follow my blog you know that I am not convinced the airline sector will return to its pre COVID numbers. I work for a fairly large corporation that has cut back travel to basically nothing and is looking at using different options to continue down that path. I’ve read enough earnings to see the writing on the wall that business travel is more than likely going to reduce over the next several years. Chorus has to go and get a loan to ensure they can come out the other side., cut there dividend, 2nd quarter results look like revenue is going to drop around 31.20% followed by similiar numbers in the 3rd quarter.They have about 81 million in cash to go with around 1.71 billion in debt. Too much has to go right and my bet is that’s just not going to happen. I prefer to hold companies that have stronger numbers, potential growth and less reliant on possible global pandemics in the future, lesson learned.
We purchased 80 shares @ $13.80 of Polaris Infrastructure Inc. Ticker PIF.TO (1/4 postion)
Who is Polaris:
Polaris Infrastructure Inc., a renewable energy company, acquires, explores, develops, and operates renewable energy projects in Latin America. The company, through its subsidiaries, owns and operates the San Jacinto project, a 72 megawatt (MW) net capacity geothermal facility located in northwest Nicaragua. It also operates three run-of-river (ROR) hydroelectric facilities, which include Canchayllo facility with an approximate 5 MW net capacity located in the Canchayllo district, Peru; El Carmen facility with an approximate 8 MW net capacity located in Maravillas, Peru; and 8 de Agosto facility with an approximate 20 MW net capacity located in Aucantagua, Peru. The company was formerly known as Ram Power, Corp. and changed its name to Polaris Infrastructure Inc. in May 2015. Polaris Infrastructure Inc. was incorporated in 1984 and is based in Toronto, Canada.
I was looking at adding into the renewable energy sector and have had a bit of a hard time finding a company that isn’t trading at a high evaluation. Polaris meets that criteria. Polaris knocked it out of the park in the 4th quarter with an earnings per share of $0.83 vs the street expectation of $0.21, They followed that up meeting earning expectations with an earnings per share of $0.27 in the first quarter, they are expected to have an earnings growth in the second quarter of approx 156%, they have a current 5 year peg ratio of 0.11 and a dividend of 6.27% with a payout ratio of 63.16%. This company is more than just a dividend company, they have the growth piece as well which is hard to find these days. As the Energy industry shifts to renewable energy I’m happy to hold Polaris.
Dividend increases and decreases
- No Raises
- EFX cut 82.61% from $0.115 to $0.02(0.6% portfolio position)
- SU cut 54.84% from $0.465 to $0.21 (2.2% portfolio position)
- CHW cut 100% (0.5% portfolio position)
Due to the small % of portfolio this should not affect it too much but very dissapointed on the Suncor cut
2016 – 2017 – 2018 – 2019 – 2020 Dividends and Rebates received
May was a lower month mainly due to some portfolio changes last year. We received $154.24 in May bringing us to a total on the year of just over $1,300.
Dividends received in TFSA 1
My thoughts moving forward
Although May was a positive month in the stock market I believe the future may not be as bright. We are still in recovery mode as the economy starts to open up. See the chart below that shows Canada unemployment numbers over the past 25 years and look carefully at the recovery length. It’s pretty telling. Most of us have never seen uneployment this high. The chart below that is the TSX over the same amount of time.
The market in my mind is not evaluating correctly. Lets take Disney for example. They miss revenue in the first quarter, followed by possibly one of the worst quarters they will have in their history with a growth earnings of around -140%. On March 20 they hit a low of $85.78/share and are currently trading at around $123/share. Disney revenue comes from different areas, although Disney+ is breaking records due to many sitting at home this is a very small piece of the pie. No movie theaters means no ticket sales, No movies being put together, Disney parks shutdown for 3 months, all merchandise and food at the parks bringing in $0 revenue and even when they open they are restricted on capacity, did i mention if you want to go there you have to wear a mask. Ya i will get right on it! I mean how the heck is Disney trading like $25 off their high. Disney 5 year PEG of 136, like give me a break. I like Disney long term but the current valuation is out to lunch.
This is similar to hundreds of companies currently trading pretty darn close to their highs when unemployment is at all time high, businesses going bankrupt, less money circulating, many scraping by and a good chance that employment doesn’t return as fast as it left (See chart above).
Don’t get me wrong many companies are going to come out stronger than ever. I mean once entertainment can be a thing again millions are going to splurge. Now more than ever its important to look deeply into the financials of a company as some will blossom and some will suffer for an extended period of time.
Currently I’m looking at various sectors for those that continue to report strong numbers and have less impact than other sectors such as Utilities, Grocery, Technology and telecom. Railroads have come off the list for me as of right now they have been doing massive layoffs which is generally a hint of a recession in the future, even though were already in one but looking at the stock market you almost wouldn’t know. If your going to buy in this market again I will suggest by in stages such as a 1/3 or 1/4 position at a time.
I would anticipate another drop in the market come the end of the 3rd quarter and currently building our cash position to be ready to take advantage. We have built a watch list and continues to do so. Here are a few that are currently on the list that we would love to add if the valuation is there.
PIF.TO, ARE.TO, TD.TO, RY.TO, EQB.TO, MFC.TO, SLF.TO, NWH.UN.TO, CPX.TO, AQN.TO, T.TO, ENB.TO, NFI.TO,BCE.TO
As Warren Buffet would say:
“THE STOCK MARKET IS A DEVICE FOR TRANSFERRING MONEY FROM THE IMPATIENT TO THE PATIENT “
Invest in yourself
Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. Please ensure you do your own research.
4 thoughts on “Money While You Sleep 2020 May Edition”
I am surprised that you dont mention ETFs. I like HBF.TO (US Equities) and ZWB (Canadian Banks)and ZWC (Canadian Companies)WHat is your take on them?
ETF’s tend to perform well when the whole market is doing well. During these times i prefer to do individual research on specific stocks. When recovery of global conditions improve I’d look at them again. I do own a few however.
Good move selling CHR.TO and cut your losses. PIF.TO looks interesting, we want to focus more on renewable as well.
The market sure doesn’t make a whole lot of sense lately eh?
Thanks! Hard to sell at a loss but I feel it’s the right decision. PIF.TO is very undervalued in comparison to other renewable companies.
The market just doesn’t add up and I have a gut feeling were in for a massive sell off. The results of most companies in the second quarter will not support the gains were currently seeing.
How was your month?
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